Australia: Labelling Responsible Investment Products
By: Lisa Lautier and Prudence Birchall
The Financial Services Council (FSC) in collaboration with the Responsible Investment Association of Australia (RIAA) released an information sheet for members (FSC Information Sheet) outlining overarching principles in relation to the use of responsible or sustainability-related terms in investment product labelling to promote consistency across the industry.
With the increase in demand for Environmental, Social and Governance (ESG) or responsible or sustainable investment (RI/SI) labelled investment products, there has become a need for consistency and reliability for both consumers and product issuers. The FSC Information Sheet seeks to provide a starting point for product issuers that use ESG and RI/SI related terms in their investment product labelling.
The FSC Information Sheet provides general commentary on:
- screening criteria;
- data and metrics disclosure;
- responsible/sustainable investment targets;
- Governance process;
- key RI/SI strategies;
- considerations when there is asset misalignment;
- considerations for multi-manager and multi-asset funds; and
- use of RI labels for indexed products.
It also provides guidance on commonly used labels such as ‘ESG’, ‘Responsible’, ‘Sustainable’, ‘Sustainable Development Goals’, ‘Earth/Nature’, ‘Impact’, ‘Ethical’, ‘Stewardship’, ‘Active Ownership’, ‘Low carbon’, ‘Net zero’ and labels with religious meanings. The information sheet sets out an expectation of what that label represents and provides good practice examples of funds that use those labels.
K&L Gates is a member of the FSC. Please get in touch with us if you would like to discuss further.